On page 360 in our book (Table 9.1)
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On page 360 in our book (Table 9.1), you will see a "discounted cash flow" example. This is a "full" example that we can use to put everything together, so to speak. In this example, pro forma financial statements were created so that it was possible to estimate periodic free cash flows. Periodic free cash flows are then discounted using the weighted average cost of capital. Please check the attachment. Please, just reproduce and explain Table 9.1. Tell us what key metrics mean/stand for...
In base of the Table 9.1:
1) reproduce this example using MS Excel,
2) define "terminal value,"
3) solve for the firm's value as a whole, and
4) solve for the firm's stock value on a per share basis.
On page 360 in our book (Table 9.1), you will see a "discounted cash flow" example. This is a "full" example that we can use to put everything together, so to speak. In this example, pro forma financial statements were created so that it was possible to estimate periodic free cash flows. Periodic free cash flows are then discounted using the weighted average cost of capital. Finally, a "terminal" value is solved for using a constant-growth perpetuity formula. If we do this for an organization, we can solve for how much it is worth. In fact, this approach is what is used to value corporate purchases, mergers, and acquisitions. Suppose you don't want to buy an entire firm, rather you just want to invest in its stock. This approach can also be used to value a firm's stock. Think about it, if we know the value of a firm, and if we subtract out the amount of that firm's debt, we are left with its equity. If we divide equity by the number of shares outstanding, we can solve for the firm's stock price on a per share basis. we are learning how to value mergers, acquisitions, and stock, all in one example on page 360 in the text. So, your task for this week is to 1) reproduce this example using MS Excel, 2) define "terminal value," 3) solve for the firm's value as a whole, and 4) solve for the firm's stock value on a per share basis.
[Solved] On page 360 in our book (Table 9.1)
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- Submitted On 09 May, 2016 07:38:00
- Academia
- Rating : 60
- Grade : A+
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- Solutions : 4595
- Blog : 1
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On page 360 in our book (Table 9.1)
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